Top Countries Globally in Forex Trading

Trading in foreign exchange, which saw global daily volumes of more than $3 trillion (Dh11trn) last year, has been drawing interest from investors across the world. Estimated to be 20 times higher than the daily volume of the New York Stock Exchange, providers of online forex trading platform are quite buoyant on the growth of this asset class in spite of the global economic crisis.

Betsy Waters, Global Director, dbFX, an online margin foreign exchange trading platform launched by Deutsche Bank, says forex trading is in for massive growth. Excerpts from an interview:

What has been the impact of the ongoing volatility in global markets on forex trade?

Forex trading has gone up. If I look at our bank, we were 200 per cent of our normal weekly average this month [October] in volumes. The impact of volatility has been positive as people who do not want to trade other asset classes have been moving into forex. For instance, in case of equities, investors are not able to buy and hold at the moment, given the global financial turmoil.

In case of forex trading, volatility is good. It means one can always buy and sell and make a positive investment. Volatility is in fact good for trading of currencies unlike other asset classes, a factor that is making it much more attractive.

Has this been a good period?

It is proving to be the best period for volumes. As far as investments are concerned, it depends whether you are right or not.

How has forex trade grown in the Middle East? Where is maximum growth in the region coming from?

Of the four regions that we have categorised - the United States, Europe, Asia and Middle East - we see high potential in Middle East. We recorded a year-on-year growth of 70 per cent this year and countries in the Middle East have significantly contributed to it. The UAE and Jordan have been among the best performing countries in this region and we have a heavy clientele here.

What are the factors that are driving growth in this region and how would you describe investor behaviour here vis-á-vis other countries?

The driving factor is that people here like to trade and earn quick money. Investor behaviour is also unique. Unlike other countries where we saw investors focusing on a wider variety of currencies, Middle Eastern foreign currency traders have been trading heavily in the euro/dollar currency pair. As much as 60 per cent of our second quarter volume from the Middle East came from euro/dollar, whereas in other regions euro/dollar formed 25 per cent to 30 per cent of the volume. This is interesting and reflects that investors here are really looking to trade the currency that trades the most, which shows that they seek quick returns.

They are looking at this as purely a trading opportunity. Other factors that would push trade are the low entry costs for forex trading. We open accounts from as low as $5,000 (Dh18,350). The platform is easily accessible and understandable. Besides, technical analysis makes it easy for people to trade.

Deutsche Bank has a large share of forex trading globally. How was this been built and how is it maintained?

We have a 20 per cent market share, which is the highest. Backed by strong research team, good technicals have helped us to maintain this position. It has been built over a period of years. We launched our online products several years ago. As a bank and being in foreign exchange we always look forward to innovations and launching product and that has helped us to keep up.

How do you see the overall forex trading segment growing in 2009?

The scenario looks quite bright. Due to high volatility, people are not necessarily able to trade in asset classes such as equities. In our business, we had a 70 per cent year-on-year increase, and we look forward to maintaining at least a similar growth rate next year. As per the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 2007, daily turnover of the world's currency markets is close to $3trn a day, compared to $500 billion for the US Government bond market and $70bn for the New York Stock Exchange.

The growth next year is expected to be quite high. The factor that would drive growth next year is the rising inclination towards forex trading.

What are the risks associated with forex trading and how can an investor minimise them?

Over-leveraging is the biggest risk. Using too much of leverage could lead to losses. Another risk is that one does not use the tools provided in the system like stop losses. One needs to plan the trade carefully before executing it.

Betsy Waters: Global Director, dbFX

Waters is the Global Director at dbFX, Deutsche Bank's market-leading online margin forex trading platform. In this role, she is responsible for overseeing sales and trading for dbFX's diverse retail client base - located in more than 70 countries around the world. Waters has had a long and established career in forex, with more than 20 years experience in sales and trading roles. Her experience - initially in an institutional capacity at Goldman Sachs and Citibank - has been instrumental in the development of dbFX as a trading platform of choice for retail investors.